- High charges and poor performance from St. James's Place Wealth Management, the largest restricted advice firm in the UK.
- Less than 2% of St. James's Place funds have maintained top performance over the past 1, 3 & 5-years.
- 79% of their unit trust funds performed worse than half of their same sector peers during the last 5-years.
- More than 70% of client money under their management is held in underperforming funds.
- Initial advice costs between 5-6% of your initial investment, compared to the industry standard of 2.06%.
With upfront charges of 5% on their range of unit trust and OEIC funds, 6% on their pension products, and ongoing costs that can reach 2.5% per annum, St. James’s Place is one of the most expensive wealth management firms in the UK. With 79% of their unit trust funds and 61% of their pension funds performing worse than at least half of their peers over the past five years, we ask where is the value for consumer investors and are SJP really worth the high cost?
Our latest St. James's Place review provides an updated analysis on the 1, 3 & 5-year performance and sector ranking of all 166 St. James's Place investment funds including their range of unit trust, pension, life and offshore funds.
Often criticised for high fees, we review the current St. James's Place charging structure, including upfront charges, ongoing charges and exit charges, comparing the SJP fee structure to alternative providers.
Also included is a detailed review of St James Place Investment Portfolios, 9-convenient unit trust portfolios that SJP offer to smaller sized clients.
This detailed and factual analysis of the largest restricted advice firm in the UK will assist new and existing investors to evaluate whether St. James's Place Wealth Management is a suitable choice.
St James's Place Charges and Fee's.
A source of contention for SJP customers are the St James Place charges and fee's applied to their investments. With upfront fee's of 5%, and exit charges of up to 6%, coupled with their restricted advice model and poor performing funds they continually attract industry criticism. The press, consumer watchdogs, and non-restricted independent advice firms continue to warn investors to review multiple options. As a publicly listed company, they have been criticised for creating value for their shareholders and less for their customer base. In response to critics, SJP's claim that the vast majority of their clients believe they offer ‘reasonable, good or excellent value for money’.
In 2017, Which? the consumer watchdog completed a damning report on St James's Place. They completed a mystery shopping exercise and found a sample of SJP advisers mislead customers, hyping up performance, not disclosing their charges, and overall labelling them a poor option for consumer investors.
The 5% upfront fees charged by SJP for initial advice and set up are still among the highest in the industry with some of the belief that their restricted model makes this advice charge questionable under existing regulation.
SJP’s model means that their partner advisers can only ever recommend SJP products even if they believe other products are better suited to their clients. They are restricted agents, and as such, they cannot provide independent advice. This has led to concerns that SJP Partner advisers are merely sales agents selling their own products, which to some makes their relationship transactional as opposed to advisory.
While advice and investment charges at St. James's Place receive frequent criticism, former chief executive David Bellamy replied that their prices were “lower than average.” However, a recent survey of 423 advisers from 263 firms found that the average initial cost to clients with a portfolio worth £100,000 or more was 2.06%. This figure is less than half of what is charged by SJP for their unit trust portfolios and almost a third of their upfront fees for their pension products.
St James's Place Upfront Fees
When you invest in any St. James's Place unit trust fund you are charged an entry fee of 5% of the amount you invest. For example, if you invest £100,000 in one of their unit trust funds you will immediately be charged £5,000 in upfront fees. SJP state that this charge is to cover the costs of setting up your investment and for the initial advice and applies to all of their unit trust funds.
When investing in a St. James's Place pension or bond product investors are charged even more. The initial upfront fee for these products is 6%, of which 4.5% is for initial advice fees and 1.5% is a product charge.
St James's Place Fund Charges
There are currently more than 3,000 unit trust funds available to UK investors and on average their annual ongoing charge comes to 1.01% of the value of your investment in that fund.
The table below shows the current annual ongoing charges associated with each St. James's Place unit trust fund. As can be seen, these fees can reach 2.5%, with the average for all 40 funds sitting at 1.69%, which is almost 70% higher than the industry average.
SJP advise that these ongoing charges cover all aspects of operating each individual fund during the year, including fees paid for investment management, administration and ongoing advice.
* The above fees are charged each year. They are calculated based on the value of your investment at that time. For example, if after 1 year you have an investment in the SJP Allshare Income fund that is valued at £100,000, you would be charged £1,920 in ongoing fees for that year.
SJP also apply a performance fee to their UK Absolute Return Unit Trust fund. On this fund, a performance fee of 20% of any outperformance becomes payable if the fund outperforms the 3 month Sterling LIBOR benchmark.
There are no exit fees associated with any of SJP's range of unit trust funds. However, for all pension and bond products investors are levied with an exit penalty that amounts to 6% of the value of their total investment. The size of the penalty imposed by this restrictive policy helps SJP to secure control of clients' investments for several years. This penalty reduces by 1% each year and it is only after staying invested in an SJP pension or bond product for 6 years that no exit penalty applies.
**If you make changes to your SJP pension or bond portfolio by adding more funds for example, then this will automatically reset the exit penalty.
In addition to the initial 6% upfront fee for all St. James's Place pension and bond products SJP also apply an ongoing charge of 0.5% which is to fund the ongoing advice and relationship with their partner advisers. In addition to this, they also levy an annual maintenance charge, which they say is to fund the management and maintenance of your underlying investments.
* These charges include the fee levied by the investment manager for managing and maintaining the investment funds each year, the costs incurred for holding the underlying investments and costs of custody and investment administration.
St James's Place charging model is unique and often chastised for its complexity, but for SJP as a business, it is highly profitable as it is designed to generate significant upfront and ongoing fees, which are currently well above the industry average. Their highly contentious exit penalty of up to 6% on their pension and bond products also helps to lock in investors and therefore maximise their ongoing revenue.
Better To Buy SJP Shares Than SJP Investments?
Many investors have stated that they wish they had invested in St James’s Place Shares instead of their funds. The high charges, cash flow and high profitability has allowed SJP to acquire more financial advice firms than any other firm in the UK, with SJP clients indirectly footing the bill.
As a distribution model, SJP has been able to acquire IFA practices faster and more aggressively than any other firm in the UK. Their ability to extract large chunks of cash from client investments as initial fee's and ongoing charges, has allowed them to acquire a large number of advisory firms and associated client banks.
SJP offer large upfront payments to advisory firms as an incentive to join and become a St James's Place partner. Once onboard newly recruited advisers will transfer their client's investments across to SJP portfolios and funds. The associated upfront fees are again generated, creating more SJP sales revenue to acquire more firms. This strategy has been extremely effective for SJP Wealth Management, but questionable for the client, who is indirectly funding further SJP acquisitions and growth.
St James Place Fund Performance
Our most recent analysis of 166 St. James’s Place unit trust, pension, life and offshore funds found that 125 consistently performed worse than at least half of their peers, and only 3 of their funds have managed to maintain a top quartile level of performance over the recent 1, 3 & 5-years.
80% Of SJP Funds Returned 5 Year Performance That Was Below Their Sector Average
Over the past 5-year period 80% of SJP funds (with at least 5-years performance history) delivered returns that were below the sector average.
One such fund was the unfortunately titled UK High-Income fund, which has been anything but for SJP’s clients. Managed by under fire fund manager Neil Woodford, this fund currently holds some £1.4 billion of client assets, yet it has consistently been the worst performing fund in the entire UK Equity Income sector. Over the past 5-years, it returned negative growth of -1.66% despite the sector averaging 18.87%.
Their £860 million UK & International Income fund has also been a serial underperformer. This Global Equity Income fund endured big losses this past year as it returned negative growth of -11.82%. Over 5 years its cumulative growth was just 14.89%, which was the 2nd lowest in the sector and well below the 42.92% sector average.
From their pension range of funds, their UK Equity fund has been among the most disappointing. This fund has continually ranked among the worst performers in its sector. Over the recent 5 years, it returned cumulative growth of just 1.64%, which was worse than 92% of its peers and well below the 15.73% sector average for the period.
Our analysis of SJP’s range of life funds identified that 82% returned growth over the past 5- year period that was lower than at least half of their peers within the same sectors. Among the worst performers was the £1.2 billion Income Distribution fund. Over the past 5 years, this fund returned cumulative growth of just 1.54%, which not only fell well below the 19.31% sector average, but it was also the worst growth returns of all 166 funds in its sector.
This wasn’t their only Life fund to rank as the worst in its sector for performance. The SJP Gilts and the SJP Index Linked Gilts life funds both ranked at the foot of their sectors for growth over the past 5-years.
From their offshore range, we analysed 42 funds for performance and sector ranking. From those with at least 5-years performance history, 89% ranked below half of all competing funds within the same sectors.
Will Fund Manager Changes Improve Performance - Or Is It Too Little Too Late?
Although St James's Place only provides access to their own range of fund’s they don’t actually manage these funds themselves. Instead, SJP prefers to outsource this to various fund managers who are selected and overseen by their investment committee. In recent years SJP has pulled the mandate to manage their funds from some high-profile fund management firms, notably Aberdeen Standard Life.
Among the most prominent changes was to the SJP Far East fund. This fund was managed by Aberdeen’s Hugh Young since 2001, but towards the end of 2016, after enduring years of underperformance (this fund continually ranked last in its sector for growth) SJP decided to move the management of this fund from Aberdeen to their rivals Stewart investors, who are part of the First State group. The move saw the fund renamed as the SJP Asia Pacific fund as it adopted a new approach and shifted away from Japanese equities it has improved the fortunes of the fund. Although this fund returned negative growth of -0.55% over the past 12 months, it was still the top performer in its sector.
More recently SJP has made a raft of changes to the management of several funds.
In July 2018 they announced that the management of their Alternative Assets fund was switching from BlackRock to Wellington Asset Management. This fund has a history of poor performance, and over the past 5-years, it returned cumulative growth of 4.81% which ranked 112th out of 113 funds in its sector. Although this past 12-months saw the fund return negative growth of -5.01%, it was still enough to rise up the sector ranking.
Another fund to switch management was the SJP Continental European fund. This fund was previously managed by SW Mitchell but is now controlled by Investec. Similar to the Alternative Assets fund, this fund has a poor performance history with recent 5-year cumulative growth of 19.87%, which fell well below the 31.56% sector average.
AXA Investment Management was another high-profile fund manager to lose its mandate with SJP. The Balanced Managed fund, which had been managed by AXA, had a history of poor performance. This past 5-years saw the fund return growth of 20.65%, which was lower than 83% of its competitors within the same sectors. The removal of AXA sees the management of this fund move to a joint management team of GMO, which will run 80% of the strategy and Jennison Associates, which will take 20%.
In response to these changes Chris Ralph, the Chief Investment Officer at St. James’s Place, said: “These changes reflect our distinctive investment management approach and commitment to selecting the best fund managers from across the globe”. What impact these changes have on fund performance remains to be seen, but with continued poor performance from a sizeable proportion of their funds, it would not be surprising to see further changes to more of their funds in the near future.
The Top SJP Funds
From SJP’s range of unit trust / ISA funds, none have managed to maintain top quartile sector performance consistently. However, one of the best performers was the £1.45 billion SJP International Equity fund. This fund has competitive 5-year returns of 67.56%, which was not only comfortably better than the 50.99% sector average, but it was also greater than the returns delivered by 84% of its peers.
A Proportion of the relatively new funds launched by St. James’s Place have got off to a strong start, most notably their Global Growth and Balanced International Growth funds. Although both of these young funds have limited history, over the past 12-months they have both ranked among the top 3% of performers within their sectors.
The consistently best performing SJP pension fund over the past 1, 3 & 5-years has been their £2.7 billion International Equity Pn fund. During this period, the fund returned cumulative growth of 4.04%, 40.5%, and 71.86% respectively, which were each well above the averages for the sector. The past 12 months, in particular, has been strong for this fund as its 4.04% growth under challenging conditions was better than 99.5% of all other funds in the same sector.
The remaining SJP pension funds have been unable to match this level of performance with the majority primarily struggling alongside their competitors. However, similar to some of their new unit trust funds a proportion of the recently launched SJP pension funds have enjoyed a positive start. One of these funds was the SJP Worldwide Income pension fund. Despite returning negative growth of -2.45% this past year, this fund still outperformed 85% of its competitors.
The 2 other SJP funds to maintain consistent top quartile performance over the past 1, 3 & 5 years where the £1.2 Billion SJP International Equity Life fund and the £778 Million SJPI International Equity GBP offshore fund. The International Equity life fund returned 3.01%, 33.21%, and 53.15% growth over the past 1, 3 & 5 years, making it one of the top funds in its sector. The offshore variant of this fund similarly excelled as it returned cumulative growth of 3.28%, 38.46%, and 65.53% over the 1, 3 & 5 year periods analysed.
This table contains the most recent funds under management values for each SJP fund. Some of these values have been updated after the publication of SJPs most recent financial results.
St James Place Portfolio Performance
SJP claims performance comparisons should not be made on single funds but on SJP-recommended portfolios, which its clients usually buy.
These portfolios are weighted based on their particular investment objectives and their associated levels of risk. Of course, they only consist of SJP funds, but as we identified in our fund performance and ranking analysis a large proportion of these funds have a history of poor performance, which will ultimately reflect in their portfolios end performance.
The following tables demonstrate the recent 1, 3 & 5-year returns of all nine SJP unit trust portfolios. Each of these nine portfolios returned a loss for the past 12 months, and over 5-years their highest growth portfolio was their Managed funds portfolio, with cumulative growth of 24.19%. SJP classify the Managed funds portfolio as medium risk, but how competitive is its performance and that of the eight other SJP unit trust portfolios?
Model Portfolio Returns
The table below details the 5-year cumulative growth of 6 model portfolios built to 6 different risk models ranging from Aggressive, Moderately Aggressive, Balanced, Cautious, Defensive and Very Defensive.
These portfolios which can be seen in our monthly Investor Magazine, returned 5-year growth of 4.93%, 25.66%, 41.69%, 51.26%, 64.28% and 77.79% respectively, potentially highlighting large room for improvement from SJP, and further raising the question as to the quality of their portfolios and their underlying funds.
(These portfolios do not constitute financial advice but can act as a helpful starting point for a conversation with a financial adviser. If you require investment advice, please visit Yodelar.com for more information. Our model portfolios are for information purposes only and should not be viewed as a recommendation to invest. The funds within these portfolios may not be suitable to you nor may the asset allocation model they follow. They have been created to provide an insight into the growth returned by 6 risk-adjusted portfolios that contain consistently top-performing funds.)
Expensive Products & Poor Performance
Through their 3,954 partner advisers, St. James’s Place has been able to build long-term, trusted and personal relationships with more than 650,000 clients.
Their business model has seen them grow exponentially year on year and the majority of their clients, who according to SJP’s recent client survey, are more than happy with the firm. This supports the fact that SJP does provide a service that is acceptable to their clients. However, if you consider fund performance and cost to be important, then you may want to look elsewhere.
Our analysis shows SJP and their products to be both expensive and predominantly poor performing, and that lower cost and better performing alternatives are plentiful and readily available elsewhere.
Are recent changes enough? Are such changes due to media pressure or putting the interests of their investors first? Does St James's Place intend to decrease their charging structures and is this even possible under their current distribution/partner model? Will they cease tying investors into pensions when the regulator says investors should be free to move? Will they make their Trust wording more flexible for investors to invest in non SJP funds without creating taxable events?
Will the model change? Will the share price for SJP rise or fall now that we are finally entering the information age of investment management? Will advisers move away, or will they stay? Only time will tell.